Mexico CPI Rises Less Than Forecast, Fueling Rate Cut Bets

Mexico’s consumer prices rose less than analysts forecast in February, supporting expectations that the central bank may cut the benchmark interest rate as soon as tomorrow.

Prices climbed 0.49 percent in the month, the national statistics institute said today, lifting annual inflation to 3.55 percent from 3.25 percent in January. The median estimate of 19 analysts surveyed by Bloomberg was for prices to rise 0.53 percent. Core inflation, which excludes energy and agriculture prices, gained 0.51 percent, compared with the 0.54 percent forecast by analysts.

Annual inflation quickened after touching a 15-month low in January that caused traders to bet the central bank would cut the overnight rate for the first time since July 2009. Twenty one of 22 economists in a Citigroup Inc. Banamex survey expect policy makers to reduce borrowing costs this year, with eight forecasting the move will happen tomorrow, after the central bank said it may cut the 4.5 percent rate if inflation keeps falling toward its 3 percent target.

Yields on fixed-rate Mexican government bonds due in December 2013 fell two basis points, or 0.02 percentage point, to 4.21 percent at 8:06 a.m. in Mexico City, according to data compiled by Bloomberg. Yields on inflation-linked bonds maturing in 2014 were little changed at 0.98 percent. The peso was little changed at 12.7786 per dollar. The peso rose 8.4 percent last year, the most among 16 major currencies tracked by Bloomberg.

To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Eric Martin in Mexico City at emartin21@bloomberg.net

To contact the editor responsible for this story: Andre Soliani at asoliani@bloomberg.net

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